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SPR Surprise Lifts WTI Prices

Stavros Tousios | Thursday 28 March 2024

Oil (CL) prices rebounded on Wednesday, March 27, as investors reassessed the latest US crude oil inventory data as the US Department of Energy (DOE) purchased crude oil to replenish its Strategic Petroleum Reserve (SPR). The crude stock increase reported by the Energy Information Administration (EIA)  came in with a large draw in Gasoline (RB) inventories, supporting Brent Oil (EB) prices up by 0.4% and WTI crude oil by 0.5%.

Despite the DOE's expectation of purchasing more oil for its reserves, JP Morgan (JPM) analysts maintained their optimistic forecast of $90 a barrel by May and $85 in the year's second half.   

However, measures like the US releasing oil from its reserve could help alleviate higher prices and potential demand destruction.

An illustration of oil prices

WTI Driven Higher By EIA and SPR

Brent crude futures for May rose to $86.38 a barrel, while WTI crude futures for May delivery increased to $81.76 a barrel on Wednesday. Both traded lower on Tuesday following a disappointing American Petroleum Institute (API) inventory report despite Ukrainian drone attacks on Russian refineries taking out 900,000 barrels of daily refining capacity.  

The EIA reported a rise of 3.2 million barrels for the week that ended March 22. However, gasoline inventories rose by 1.3 million barrels, and distillate stockpiles decreased by 1.2 million. Oil prices initially fell on expectations that the Organisation of Petroleum Exporting Countries (OPEC+) would maintain its current production policy at its April meeting. However, Russia has ordered oil companies to lower their output in the second quarter to meet its OPEC+ production target, indicating its commitment to keeping supply tight and supporting higher prices.  

In addition, the administration of US President, Joe Biden,  awarded contracts to buy 2.8 million barrels of oil to replenish its SPR. Notably, the average price paid stood at $81.32 per barrel, above the target price of $79. 

Exceeding their $79 per barrel ceiling exceeded the original $72 limit by far. This surprised markets as the US had released 180 million oil barrels from its SPR to ease rising prices, now trading over the $80 per barrel mark. Biden's actions have resulted in crude oil prices hovering around their highest level since November, building upward pressure on inflation.

Future WTI Demand Expectations

The DOE has purchased 26.28 million barrels for an average price of $76.47. However, it still has plans to buy more oil at $79 per barrel or below. It is expected to continue refilling the SPR depending on global oil market conditions, with 3 million barrels scheduled for delivery in August. 

In the meantime, however, the US administration still has up to 60 million barrels of crude oil in the SPR that it could release to alleviate high prices. As of March 2024, SPR crude oil stocks stood at around 371 million barrels, well below historical peaks. 

Another factor likely affecting expectations is the future demand for Asian crude oil imports. They are expected to reach the highest level in 10 months at 27.48 million barrels per day in March, driven by China and India. On the one hand, China's crude imports are forecast to reach 11.75 million barrels per day in March, up from February. This is due to refiners increasing throughput to build inventories before the maintenance season. On the other hand, India's crude imports are estimated to hit the 4.93 million barrels per day mark in March, up from February. 

Moreover, global trade flows started to pick up at the beginning of 2024 after slowing down in late 2022 and 2023. Several indicators point to a rebound in manufacturing and freight activity, which is expected to boost Diesel (G) and other distillate fuel demand and lift oil and fuel prices. In addition, if central banks cut interest rates this year as expected, the rise in freight volumes would likely accelerate further.

In the meantime, with OPEC+ unlikely to change oil output policy until its full gathering in June, any sign of members failing to stick to quotas could be viewed negatively.  

What Analysts Expect for WTI

So far in the first quarter, WTI is up almost 14%, and Brent is up nearly 12%, supported by geopolitical uncertainties, OPEC supply cuts, and easing concerns over China's economy. ICICI Bank Global Markets expects global crude oil demand to grow by 1.1 mbpd in 2024 and 1.2 mbpd in 2025, led by emerging markets like China and India.

Commodity analysts at Standard Chartered expect an oil price rally in the coming months as energy markets kicked off the year with an overly pessimistic view of oil demand. Some analysts predict a deficit in the second quarter, which could support higher oil prices. Although JP Morgan has kept its 2024 oil price forecast unchanged, it said prices could hit $100, citing Russia's decision to cut output. (Source: Barron's)

However, Citi (C) analysts predict oil prices will fall over the next two years due to stronger supply growth and weaker demand, down 36% from current levels.


The recent WTI rebound signals a market responding to short-term supply cues. Despite analysts at JPMorgan holding forecasts steady, the unpredictable nature of geopolitical events, OPEC+ production decisions, and US strategic reserve actions could sway the market in either direction.

Varied analyst expectations, ranging from predictions of deficits and rallies to forecasts of falling prices due to supply and demand shifts, underscore the market's uncertainty. As such, investors may want to maintain vigilance, considering both the potential for short-term volatility and the longer-term economic trends that may impact oil prices and the broader energy sector.

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